Challenges remain for regional airports

Earlier this year, the AAA welcomed the extension of the Remote Access Upgrade Programme for remote airports in the 2018-19 Federal budget.

However, we noted at the time that there were many regional airports missing out on vital funding – and for those airports times are tough. Regional airports not classified as remote have no dedicated funding source for upgrades or essential maintenance, despite the fact that many of them are struggling to make ends meet.

There remains a range of barriers and challenges for regional airports and their communities.

It costs more to maintain and upgrade regional airports

Regional airports generally feature ageing, World War II era infrastructure that can be expensive to maintain – and needs to be upgraded over time to meet modern aviation standards. The local governments that own and operate most of our regional airports do not have in-house expertise to maintain and upgrade aviation infrastructure. So when updates are required, expertise and equipment needs to be sourced from other locations.

At the same time, the relatively small size of regional airports mean effective economies of scale for maintenance and upgrades simply cannot be achieved. This means airport works – from basic maintenance projects to major upgrades – are more expensive for regional airports than their capital city counterparts.

Regional airports have limited income

Australian airports generally earn aeronautical revenue based on a charge to airlines for each passenger that flies in and out of its airport. At regional airports, passenger volumes are generally low. For example, the Queensland airport of Cloncurry facilitated just over 26,000 passengers last year, while Tasmania’s tourism destination of King Island facilitated 43,000 passengers. This is significantly less than the many millions of passengers that our capital city airports facilitate each year.

With passenger charges only representing a small proportion of airfares for each passenger, this income does not support the often complex maintenance and upgrade requirements needed to support the safe and secure operation of an airport. Added to this, regional airports are also less able to pursue revenue through retail and other activities at the airport. And to make matters worse, local councils operating regional airports generally have a limited rate base and borrowing capacity to help fund major works – and if they can fund these works it can mean reducing spending on other community projects.

When you consider that airport upgrades are often significant projects, local councils must be able to not just fund the day-to-day costs of operating an airport, but save for the future as well. For many regional airports this is simply not possible – in fact 60 per cent of regional airports are struggling to make ends meet.

Regional airports are becoming more expensive

New security requirements for regional airports is one example of how it is becoming more expensive for local councils to maintain them. Technology is presenting new opportunities to improve the safety and security of aviation, which is welcomed by the industry. But this is adding to the ongoing costs for regional airports, who do not have the financial ability to cater to these increasing demands.

More is needed to ensure increasing safety and security requirements for regional airports are matched by funding to support them.

While government funding for security upgrades at regional airports is welcomed, this funding only covers the equipment costs for new security measures. These upgrades will create new, ongoing staffing and maintenance costs that must also be funded to ensure regional airports’ long terms sustainability.

Regional airports lack market power

We have seen a number of media stories in recent times where airline Regional Express (Rex) has publicly resisted increases to regional airport charges. Most recently, it has announced the reduction of services to King Island after the local council introduced a passenger charge to address its budget deficit. Regional airlines can redirect their aircraft to other locations, making it difficult for local airports to increase charges when they need to.

In fact, a survey by the AAA last year found some of our members had been asked by airlines to reduce charges off the back of a threat to reduce services. What’s so surprising about this is that this is occurring even when 75 per cent of regional airports surveyed had either maintained or reduced airport charges in real terms over the last five years. So the pressure not to increase charges is being felt by many of our members. This makes it incredibly difficult for regional airports to not just fund upgrades and improvements, but simply to make ends meet. The AAA is pleased to see some of these challenges discussed as part of the Federal inquiry into regional and remote airfares now underway, and we look forward to further examining these issues as the inquiry process continues.

There are many challenges for regional airports, however they continue to play such an important role in our communities. They remain the lifeblood of our community, particularly in regions where air services provide vital links for the local economy. While airports and airlines must work together constructively to achieve positive outcomes, government funding is also an essential part of the puzzle. It’s time to discuss the sustainable future of our regional airports to ensure they can continue to meet our community’s needs.

By Caroline Wilkie

About Caroline Wilkie

Caroline Wilkie is the Chief Executive Officer of the Australian Airports Association.